Since block size is a minimum unit size you are also discussing the impact on the CPU and the amount of usable data transferred in a given time.
How? How is it different to transter 64 blocks of 512 bytes vs 32 blocks of 1024 bytes?
An extreme example - if the average file size being read is 1K and a cluster size is 8K (thus transfer block size) it'll be transferring more slack space than say with a block of 4K, plus the CPU will be doing more redundant IO operations (CRC, reads etc).
Why would the filesystem read the whole 8K in this case? Even if it would read the whole 8k, modern drives are so fast in sequental access that it makes little difference if you read 1k or 8k.
What CRC are you talking about? If it's something in the filesystem (no amiga filesystem CRCs the data btw), why would the filesystem calculate CRC for the whole 8k if only 1k is of is valid data? Lets not forget that most time is spent reading and writing the data. Metadata is insignificant in comparison.
This probably doesn't matter for compact flash which has a standardised sector of 512B so I guess that part answers my initial question as to the best size for CF, either 512B or 1K 
It was about the new 4k hard disk drives which report 512k block size (for compatibility reasons) while actually using 4k block sizes internally. They do work, but writing gets really slow of the block is not aligned properly. Until recently both Windows and Linux created such bad partitioning.
As for flash, they have a totally different internal structure which the typical filesystem has no way of knowing. The firmware tries to do some magic tricks to accomodate for the silly things typical filesystems do when they assume classical HDD. There's little that can be assumed about flash, except that small writes are typically really slow (due to flash internal arrangement).
http://en.wikipedia.org/wiki/UBIFS is an interesting approach to the problem. Rather than going thru the firmware, access the flash directly. Obviously this requires special HW (that is: it's not usable with your off-the-shelf SSD drives). Here's some more about UBIFS:
http://www.linux-mtd.infradead.org/doc/ubifs_whitepaper.pdf